Blue Cross Blue Shield of New Mexico is raising its premium rates for about 31,000 members with individual health plans.
New Mexico Insurance Commissioner John Franchini on Tuesday approved a 6.9 percent rate increase that took effect last Friday. After denying Blue Cross's previous 9.9 percent increase, Franchini said the hike he approved is closer to medicine's rate of inflation, reported the El Paso Times.
Franchini's decision represents his "new philosophy" of allowing rate increases on a closed block of business, meaning the insurer only sells a specific product to existing customers, primarily based on the medical inflation rate," he told the Albuquerque Journal. These closed blocks tend to accelerate costs because customers start demanding more medical services over time, but the insurer isn't adding new customers that otherwise would help lower costs. "We hope to turn the corner here and look at rate increases for closed blocks of business on the basis of inflation and not on what they need to make the profit they did in the past," Franchini added.
Blue Cross said it originally sought a higher rate last year to help cover the cost of providing policies to individual members in rural areas, where medical expenses are higher. It threatened that it might pull out of the market in some areas if it didn't win approval of the 6.9 percent rate increase, according to the Santa Fe New Mexican.
For roughly 25,000 of the 31,000 affected Blue Cross members, this rate increase is the second premium rise in three years. In 2010, Blue Cross increased its rates for each policyholder by 18 percent to 25 percent.